A recent IMF report on the country stated: “The resulting drop in oil revenues impacted the non-oil economy through diminished private consumption, cuts to public spending and the accumulation of substantial arrears to domestic firms, particularly in the construction sector. Despite its favourable near-term outlook, Angola’s reliance on oil revenues and imports leaves the economy highly vulnerable to economic shocks.”
Angola imports a staggering amount of its requirements. While many people in rural areas grow what they consume, there is little economic connection between rural and urban areas. Even staple foodstuffs such as flour and rice are imported from Europe, contributing to Luanda’s reputation as one of the world’s most expensive cities. This disconnect has prevented the country as a whole from benefiting from national economic growth and it is shocking that it exists amid such poverty.
New import tariffs introduced in March have driven up prices still further, far beyond the levels seen in New York, London or Tokyo, so there is plenty of incentive for domestic entrepreneurs to produce goods for local consumption.
In March, the Central Bank Governor, John Rwangombwa, announced a projected growth rate of 6% for 2014 and 6.7% for 2015. He also said he hoped the country’s reliance on foreign aid would drop to 20% by 2018.
However, most sources agree that there has been a little progress. Anthony Lopes Pinto, head of Imara Securities Angola, said: “It is now easy to find local produce in the shops. Previously, it was hard. It’s still an expensive city to live in, but not to the same extent as before.” A 50% duty has been imposed on fruit and vegetables, even those imported from neighbouring states, although goods such as flour, rice, sugar and beans are exempt from the tariffs. The big fear is that the urban poor will be hardest hit.
As in South Africa, the gap between rich and poor is enormous. Most people do not have formal jobs but even for those that do, the average national salary was just $260 a month in 2010. This figure was skewed by the monthly average $5,400 in the oil industry. The move is seen by many as an attempt to prepare Angola for entry into the Southern African Development Community’s (SADC) free trade area in 2017.
Most duties on goods traded with other SADC member states will have to be lifted in 2017, but three years seems a remarkably short time in which to cultivate new businesses within a protected environment. If the new tariff structure still fails to ignite interest in domestic production, then there really is something wrong in Angola.